MPs urge lawmakers to close loopholes which allow rogue companies to undercut the best employers

MPs have urged the government to close the loopholes ‘once for all’ that allow certain companies to exploit insecurity of work and undercut Britain’s leading employers.

The Business and Trade Committee, in its investigation into the Employment Rights Bill that is currently at the report stage of its passage through Parliament heard from businesses concerned about rising costs and firms citing the need for flexibility. The Committee did find evidence of exploitation across all business types and sectors.

Liam Byrne, the chair of the committee, said: “Our committee heard loudly and clearly that finding the right people for the right jobs is the number-one challenge for British businesses trying to grow. We can’t solve this problem by letting firms that are rogue ignore new rules or mistreat their employees.

We know that businesses are worried about rising employment costs, but we heard from employers in Britain who have tried and tested methods to partner with their employees. We’ve also seen evidence of abuse against workers, which has horrified us.

In the last two months, the Committee has heard testimony from many witnesses, including executives of McDonald’s and Evri as well as Frasers Group, Amazon, Shein, Frasers Group, and Amazon.

In January, when new allegations of sexual harassment and harassment were made public, provided evidence. Over 700 junior employees, both current and ex-employees, are now suing the company for failing to protect their rights. The study found that the majority of workers with zero-hours contracts were females aged 16-24 who worked part-time in the food and accommodation sectors.

Evri claimed to be “self-employed+”, but the committee heard from scores of drivers who accused the courier of poor working practices, which, like McDonald’s, were enabled by the absence of contract guarantees. The committee stated that Evri refused the acknowledgement of the significant and consistent accusations in evidence before Parliament.

Amazon could not tell the committee the reason why its workers went on strike. Frasers Group Sports Direct confirmed that over three-quarters of its staff in its Shirebrook Warehouse are agency employees, despite having promised to increase the percentage of contract staff back in 2016.

The committee is concerned that some companies may use agency workers to avoid reforms of zero-hours contracts. Evidence from Uniqlo and Gymshark raised concerns about firms utilizing a “multiple-tiered” system of lowering the benefits offered to self-employed workers.

Byrne said: “We would like ministers to make strategic changes to Employment Rights Bill in order to ensure that Britain’s top firms are no longer undercut by rogue businesses cutting corners and exploitation their workers.

What is good to Britain and British business is also good for Britain. We need to make sure that every company is at the top of its game if we want Britain’s economy to grow the fastest in the G7. If ministers act on our recommendations, the Employment Rights Bill may help.

Recommendations on the Employment Rights Bill

The Committee has made a number of key recommendations for tightening up the Employment Rights Bill, including that ministers:

• In the law, be explicit about reforms that will end exploitative zero hour contracts.
• Reforms of the worker status and false self-employment should be accelerated, not slowed down.
• The Fair Work Agency should be adequately resourced. Employers must be informed of the new rights. The committee asks Acas to launch an information campaign.
• Modernise how unions can organise themselves in the digital age, to guarantee appropriate access rights for unions as well as equal time to make their case to employees.
• Update the Modern Slavery Act, making modern slavery statements compulsory and introducing penalties for those companies that do not disclose action plans.

The committee expressed concern over what was missing in the Bill. Shein failed to respond to a question in Parliament about the origin of the cotton used in the products that were shipped to the UK. In a subsequent correspondence, it was confirmed that unlike the US, the UK doesn’t require legal assurances about the geographical origin of products.

The Financial Conduct Authority also explained that investors who are interested in listing on the London Stock Exchange do not have to take into account the risks of forced labor in a company’s supply chain. They only need to assess how material this risk is.

The UK faces a “serious” risk of being a “dumping ground” for goods if it doesn’t adopt tougher laws from its allies. This includes blanket import bans on products from countries where forced labor is prevalent.

There are more workplace disputes

Ben Willmott is the head of public policies at the CIPD. He said: “We support the Business and Trade Committee’s recommendation that ministers set out clear plans for the Fair Work Agency to be adequately resourced. However, this will not ensure employment rights are upheld, or support employers to comply with new laws. Acas, which is responsible for enforcing employment laws, also needs to be given more resources. The Fair Work Agency is only one part of this enforcement system.

“More consideration needs to be given to how the measures contained in the bill are implemented effectively in the workplace to avoid causing more workplace disputes or a dramatic increase in claims to employment tribunals. The government must prioritise the creation of a plan for implementation and the support provided to employers in order to prepare them for the new regulations. It is not enough for the law to be a success – employers must be educated and enforced.

“An effective system of labour market enforcement would be the key foundation for another recommendation from the committee: an industrial relations plan to support social partnerships between employers, unions, and sectoral bodies. The development of a code of practice for collective employment relations could support this.

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Neil Carberry, chief executive of the Recruitment and Employment Confederation, said that “the committee’s report brings attention to this Bill’s complexity and size.” Businesses are concerned that the Bill could do more harm than benefit unless employers’ obligations are clearly defined, realistic and – as emphasized by the committee – enforced. If the committee’s suggestion is to add more details to the Bill, then the timeline set by the government will need to be extended. If the government intends to do this through regulations, a partnership between employers and unions is needed on key details.

“What the unions negotiated before the election with Labour is one thing. But good employment relations depend on bringing employees and employers together. Not pre-election agreements that are short on details and long on the potential economic damage. Let’s talk about it and make sure we get the right things.

He said: “The report contains a number other risks and examples of employers’ perceived bad practices. This is worth our attention and time.” We must also consider the vast majority who are doing things right. The Budget has brought about a number of changes to national insurance, which are affecting their business costs. They can only create employment if their businesses are sustainable.

“A flexible labor market is crucial to this. Different forms of work are a fundamental component of generating opportunities and growth, not a way to avoid anything. They need the support of Parliament, not new challenges. The report acknowledges that most agency workers want the flexibility that this type of work offers. This support should be reflected in the Bill as well as secondary legislation.

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